Competing in the Age of AusterityStephen Hester, Group Chief Executive 28th September 2010

Bank of America Merrill Lynch Banking & Insurance CEO Conference

2

Important InformationCertain sections in this presentation contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the

words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘believes’, ‘should’, ‘intend’, ‘plan’, ‘probability’, ‘risk’, ‘Value-at-Risk (VaR)’, ‘target’, ‘goal’, ‘objective’, ‘will’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and

similar expressions or variations on such expressions.

In particular, this document includes forward-looking statements relating, but not limited, to: the Group’s restructuring plans, capitalisation, portfolios, capital ratios, liquidity, risk weighted assets, return on

equity, cost-to-income ratios, leverage and loan-to-deposit ratios, funding and risk profile; the Group’s future financial performance; the level and extent of future impairments and write-downs; the protection

provided by the APS; and the Group’s potential exposures to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. Such statements are

based on current plans, estimates and projections and are subject to inherent risks, uncertainties and other factors that could cause actual results to differ materially from the future results expressed or

implied by such forward-looking statements. For example, certain of the market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various

limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.

Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: general geopolitical and

economic conditions in the UK and in other countries in which the Group has significant business activities or investments, including the United States; the global economy and instability in the global

financial markets, and their impact on the financial industry in general and on the Group in particular; the full nationalisation of the Group or other resolution procedures under the Banking Act 2009; the

monetary and interest rate policies of the Bank of England, the Board of Governors of the Federal Reserve System and other G7 central banks; inflation; deflation; unanticipated turbulence in interest rates,

yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices and equity prices; changes to the valuation of financial instruments recorded at fair value; changes in UK and

foreign laws, regulations, accounting standards and taxes, including changes in regulatory capital and liquidity regulations; a change of UK Government or changes to UK Government policy; changes in the

Group’s credit ratings; the Group’s participation in the APS and the effect of such scheme on the Group’s financial and capital position; the conversion of the B Shares in accordance with their terms; the

ability to access the contingent capital arrangements with Her Majesty’s Treasury (“HM Treasury”); the ability of the Group to attract or retain senior management or other key employees; impairments of

goodwill; pension fund shortfalls; litigation and regulatory investigations; general operational risks; insurance claims; reputational risk; limitations on, or additional requirements imposed on, the Group’s

activities as a result of HM Treasury’s investment in the Group; changes in competition and pricing environments including competition and consolidation in the banking sector; the financial stability of other

financial institutions, and the Group’s counterparties and borrowers; the value and effectiveness of any credit protection purchased by the Group; the extent of future write-downs and impairment charges

caused by depressed asset valuations; the ability to achieve revenue benefits and cost savings from the integration of certain of the businesses and assets of RBS Holdings, N.V. (formerly ABN AMRO);

natural and other disasters; the inability to hedge certain risks economically; the ability to access sufficient funding to meet liquidity needs; the ability to complete restructurings on a timely basis, or at all,

including the disposal of certain non-core assets and assets and businesses required as part of the EC State aid restructuring plan; organisational restructuring; the adequacy of loss reserves; acquisitions or

restructurings; technological changes; changes in consumer spending and saving habits; and the success of the Group in managing the risks involved in the foregoing.

The forward-looking statements contained in this presentation speak only as of the date of this presentation, and the Group does not undertake to update any forward-looking statement to reflect events or

circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to buy any securities or

financial instruments or any advice or recommendation with respect to such securities or other financial instruments.

3

Progress to date in the Strategic Plan

Introduction and agenda for today

Driving Core performance improvements

Concluding comments

RBS is being radically restructured and is on target for sustainable future success. Huge changes are well underway reducing excess balance sheet, risk, product, client & geographic scope, cost base and changing the culture & management.This presentation focuses on the pathway to successful delivery of this plan, the resultant restructured “Core RBS”, how these businesses will compete in the ‘age of austerity’ and the shape of future performance.

Agenda

Introduction

Core RBS performance to date

Progress to date in the Strategic PlanCompeting in the Age of Austerity

5

To be amongst the world’s most admired, valuable and stable universal banks, powered by market-leading businesses in large customer-driven markets

To return >15% sustainable RoEs, from a stable AA category risk profile and balance sheet

The business mix to produce an attractive blend of profitability and moderate but sustainable growth – anchored in the UK and in retail and commercial bankingtogether with customer driven wholesale banking, and with credible growth prospects geographically and by business line

Management hallmarks to include an open, investor-friendly approach, strategic discipline and proven execution effectiveness, strong risk management and a central focus on the customer

RBS’s 2013 vision

Strategic Plan – clear direction

6

Built around customer-driven franchisesComprehensive business restructuringSubstantial efficiency and resource changesAdapting to future banking climate (regulation, liquidity etc)

Businesses that do not meet our Strategic Tests, including both stressed and non-stressed assetsRadical financial restructuringRoute to balance sheet and funding strengthReduction of management stretch

Core BankThe primary driver of risk reductionThe focus for sustainable value creationNon-Core

Cross-cutting InitiativesStrategic change from “pursuit of growth”, to “sustainability, stability and customer focus”Culture and management changeFundamental risk “revolution” (macro, concentrations, management, governance) Asset Protection Scheme (2012 target for exit)

RBS is driving through the key elements of its Strategic Plan

Strategic Plan – defined aspirations

7

2009

Formation of the Strategic PlanCreation of Non-Core£2.5bn cost saving programme announcedBusiness restructuring and reinvestmentNew Management and BoardAPS entered into and Recapitalisation completed‘Tools for the job’ in place

2010/2011

Execution and implementation phase of the planInvestment in Core franchises‘Roll up our sleeves’Economic recovery takes holdImprovement in underlying Core performance

Ongoing revenue and cost initiativesCompletion of Non-Core run-down and APS exit2013 targets achieved

– Returns– Risk– Franchise

Strategic Plan - timeline

Core profits build, Non-Core losses fall

2012 onwards

Target >15% RoE

2010/11 – executing the plan

81 As at 1 January 2008. 2 As at October 2008 3 Amount of unsecured wholesale funding under 1 year. H110 includes £92bn of bank deposits and £106bn of other wholesale funding. 2013 target is for <£65bn of bank deposits, <£85bn of other wholesale funding. 4 As at December 2008 5 Eligible assets held for contingent liquidity purposes including cash, government issued securities and other securities eligible with central banks. 6 Funded tangible assets divided by Tier 1 Capital. 7 As at June 2008 8 Group return on tangible equity for 2008 9 Indicative: Core attributable profit taxed at 28% on attributable core spot tangible equity (c70% of Group tangible equity based on RWAs). 10 Adjusted cost:income ratio net of insurance claims. 11 2008

Key performance indicator

Worst point

FY 09 Actual

2013 Target

Core Tier 1 Capital 4%(1) 11.0% >8%

Loan : deposit ratio (net of provisions) 154%(2) 135% c100%

Wholesale funding reliance(3) £343bn(4) £250bn <£150bn

Liquidity reserves(5) £90bn(4) £171bn c£150bn

Leverage ratio(6) 28.7x(7) 17.0x <20x

Return on Equity (RoE) (31%)(8) Core 13%(9) Core >15%

Adjusted cost : income ratio(10) 97%(11) Core 53% Core <50%

Q2 10 Actual

10.5%

128%

£198bn

£137bn

17.2x

Core 15%(9)

Core 52%

Current position versus 2013 targets

Strategic Plan - progress to date

91 Office National Statistics (UK), Bureau of Economic Analysis (US) and EIU (EU)2 Office for National Statistics (UK), Department of Labour (US) and EIU (EU)3 Eurostat (UK), Department of Labour (US), and EIU (EU)

Economic backdropChallenges remain in achieving global economic re-balancing

Interest rates stagnate or rise too rapidly

Economic growth falters

Sovereign credit risks not controlled

Wholesale funding conditions deteriorate

Impact of regulatory change

Possible risks

Economies continue to recover

Pace of recovery impacted by continued deleveraging

Savings rates supportive of balanced funding

Interest rates start to move up from 2011

Future assumptions Consensus Economic Data

2.5

1.5

1.9

0.7

1.0

0.4

1.3

0.3

(0.3)

0.3

Inflation (CPI)3

Interest rate4

2013E2012E2011E2010E2009Western Europe (%)5

1.61.31.01.4(4.1)GDP growth1

8.3

1.8

2.2

8.8

1.7

1.8

9.1

1.5

1.4

9.4

1.6

1.0

8.9

0.6

1.0

Unemployment rate2

Inflation (CPI)3

Interest rate4

8.79.09.49.79.3Unemployment rate2

2013E2012E2011E2010E2009UK (%)

2.31.91.52.3(2.6)GDP growth1

2013E2012E2011E2010E2009US (%)

2.9

3.1

2.3

2.4

2.9

1.4

3.0

0.8

2.2

1.2

Inflation (CPI)3

Interest rate4

7.88.28.37.97.6Unemployment rate2

1.81.61.41.4(4.9)GDP growth1

4 3 month Libor (UK), 3 month commercial paper rate (US), 3 month Euribor (EU)5 Western Europe (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy

Netherlands, Norway, Portugal, Spain, Sweden, Switzerland & UK)

10

The regulatory picture continues to evolve

Future regulatory framework

Basel III- Jump in conservatism, but time to adjust. Important detail still to work through - Welcome recent developments, appear rational

UK Banking Commission- Hearings begin Autumn ‘10, initial findings Spring ‘11, final report September ‘11- Focus on: - Competition in UK banking sectors

- Size and shape of future banking models

Resolution regimes- Too big to fail, Living wills, Bail-ins- Regulatory debate taking shape. Scope for political interventions- Complex topic. Needs care and time

Industry levies- Scope and impact still developing

Making Banks prospectively much safer, giving better tools to deal with bank failure, but not without economic consequences

Core RBS Performance to dateCompeting in the Age of Austerity

12

GBM33%

US R&C10%

GTS8%

Ulster Bank3%

RBS Insurance

13%

UK Corporate

13%

UK Retail17%

Wealth3%

Core RBS

Future Group profile, a strong and balanced business

Targeting 2/3 Retail & Commercial, 1/3 GBM1

Geographic split: UK c55%, US c25%, EU 10-15% & RoW 5-10%Leadership positions balancing business cycle, capital and funding intensity

Future business mix

Core RBS H110 Core revenues by Division

R&C67%

GBM33%

1 Excluding Insurance business

A universal bank anchored in the UK and in Retail & Commercial, diversified by

geography, business mix and risk profile

Global Banking

& Markets

GTS

Retail & Commercial

UK Retail

UK Corporate

Wealth

Ulster Bank

US R&C

Global Corporate

Clients

Financial Institutions

RetailCustomers

Deposits

SMEs

Governments

Domestic Corporate

Market Funding

13

65

70

75

80

85

90

95

100

Q109 Q209 Q309 Q409 Q110 Q210100

110

120

130

140

150Customer Deposits Loan:deposit ratio

UK CorporateStrong customer franchises

Supporting customers while reducing property concentration

Closing funding gap – balancing loans with deposit growth

Re-establishing profitability - Rebuilding margins

500

600

700

800

900

1,000

1,100

Q109 Q209 Q309 Q409 Q110 Q2101.5

2.0

2.5

3.0

3.5UK Corporate Total IncomeUK Corporate NIM

Business has maintained high level customer satisfaction with improved cross-sellBanking services provided to 105,000 start ups over the last 12 months, up 11%. SME market share +1% to 27%

£m %

£bn

Loans & Advances, £bn

Commercial1 Corporate1

RBS

Peer average

52% 58%

54% 62%

1 % of customers responding ‘Excellent/Very good’ when asked regarding the business banking service provided by main bank, how would you rate the overall quality of service of the past year. Source: Charterhouse Research UK Business Banking Survey Q1 & Q2 2010. 2 Applied for the period March 2010 to February 2011. 3 Corporate & Commercial ex Property. 4 Peak NIM for Mid Corporate and Commercial Banking, 2005

Customer Satisfaction ScoresFunding gap closing

%

Pre-2008 NIM 3.25%4

£12.7bn of gross lending facilities extended in Q210On target to reach £50bn gross lending target2

35 310

20

40

60

80

100

120

Commercial Property Corporate &Commercial

Total

Q209 Q210

(10%)

+8%

+2%

115113

3034

8579

3

14

UK RetailOpportunities for growth - growing customer numbers

Developing customer proposition - Rapid growth online

Strong growth in deposits and mortgages

Re-establishing profitability - Improving Jaws

£bn

5%Income growth 6%(3%)Cost growth 3%

18%Pre impairment profit 9%

Q-o-Q2

Margin rebuild helping to support higher divisional revenues

Cost initiatives beginning to gain traction

3.0

3.5

4.0

4.5

5.0

Apr 09 Oct 09 Apr10

Online user growth

The division is successfully accelerating growth in remote channels

3 month active accounts, m

70

75

80

85

90

Q109 Q209 Q309 Q409 Q110 Q21060

70

80

90Deposits Mortgage Lending £bn

Current accounts growth +2%Saving accounts growth +5%Mortgage account growth +8%

Retail franchise gains are increasing customer numbers

Competitive products continue to grow RBS market share in focused areas

Y-o-Y1

1 Q210 versus Q2092 Q210 versus Q110

Y-o-Y1

15

US Retail & CommercialDeveloping customer proposition - seeing early results

Reshaping the business - Focus on improving deposit mix

Enhancing performance - Improving market share

Re-establishing profitability - Rebuilding margins$bn

0.00.20.40.60.81.01.21.4

Q209 Q309 Q409 Q110 Q2101.5

2.0

2.5

3.0Total income NIM$bn %

Investment in marketing and sales outreach has driven account growth….

+2%Net Retail checking account growth+3%Net Business checking account growth

Y-o-Y1

….and deepened household relationships

49%Direct deposits2

12%Active bill payment3

March ‘09

37%Active online banking3

March ‘1051%14%39%

The business plan has delivered customer metrics to-date ahead of the original strategic plan

DepositsShare of Citizens Top-10 Markets4

CorporateLead Relationship in footprint4

Citizens

Original Strategic Plan

US Retail & Commercial Market shares

1 Q210 versus Q2092 Penetration of total CFG retail households for direct deposits and steady save

12.6%

13.2%

Middle Market SME’s

6.0%

8.0%

6.0%

7.0%

Total

Citizens

Original Strategic Plan

17.0

17.5

18.0

18.5

19.0

19.5

Q209 Q309 Q409 Q110 Q210

-30.0

-28.0

-26.0

-24.0

-22.0

-20.0

-18.0

-16.0

Non interest bearing checking accountsHigh yield legacy term balances

Up 9% y-o-y

Down 37% y-o-y

Income up 7% y-o-y1

$bn

Demand

Term

3 Penetration of total CFG retail checking households for active bill payment and active online banking 4 Q1 2010

16

4.5

3.0

Q309Q109 Q209

1.5

Q409 Q110

2.14.4 2.6 2.0 2.8

Q210

1.9

Underlying performance in line with peers to date

4565

(26)(31)(43)

(31)-50-30

-101030

5070

Revenues C:I Ratio Operating Profit

GBM Peer Average%

3 3

1 Q210 vs Q1102 Ex fair value of own debt3 Excluding UK Bonus Tax charge

Enduring franchise - Business remains resilient, focused on its 5 year strategy

Continued Investment - Halfway through a two year £550m+ investment programme

Tight risk management - Upgrading risk management framework; Changed risk culture

Continued performance - Maintained a leading position in core franchise areas

Division benefitting from greater focus: Better balance sheet profile Higher quality revenue streamsIntense focus on: Strengthening Core customer relationships Sustaining strong Group customer synergies

2

GBM

Underlying quarterly income (ex FVooD), £bn Benchmarking GBM’s quarterly performance1

17

Progress to date in Core divisions performanceWe are making progress, but significant opportunity remains

H110 Reported 2013 Target

c.55

c.50

<35

<55

c.50

<50

<50

46

57

43

69

62

70

59

H110 Reported 2013 Target

GBM

UK Retail

UK Corporate

US R&C

Ulster Bank

Wealth

GTS

H110 Reported 2013 Target

nm

<105

<130

<90

<150

<30

<20

nm

114

119

81

154

41

25

23.7% 15-20%

13.6% 15%+

4.2% 15%+

(19.2%) 15%+

nm nm

nm nm

14.2% 15%+

Return on Equity1, % Cost:income Ratio, %Loan:deposit Ratio, %

1 Return on Equity is based on divisional operating profit after tax, divided by divisional notional equity based on 8% of divisional risk weighted assets (10% GBM), adjusted for capital deductions

18

Core loan:deposit ratio nearing target of 1:1Quality of liquidity reserves improve as central government bond portfolio increases towards target of £50bnLarge strides made in terming out wholesale funding > 1 yearReducing portfolio weighting in CRE

1 Net of provisions 2 Net loans & advances to customers less customer deposits (excluding repos) 3 Wholesale funding with a remaining maturity of > 1 year as a percentage of total wholesale funding, excluding bank deposits

50%

£20bn

£171bn

£16bn

104%

FY09

57%Wholesale funding > 1 year3

£8bn

102%

£25bnOf which central govt bond portfolio:

£137bnGroup liquidity reserves

Core loan:deposit gap2

Core loan:deposit ratio1

Q210

Progress to date in the Core risk profile

The Core bank will operate off a more conservative balance sheet in future

Key balance sheet metrics

Core property as % of loans 11.6% 10.9%

Driving Core performance improvementsCompeting in the Age of Austerity

20

Average liability product margins remain at historic lows

Plan assumes liability margins will improve, asset margins to hold

Revenue growth - the margin questionM

argi

n

To achieve the plan:

Current new business asset margins hold steady

Interest rates rise towards end of plan period supporting liability margin expansion

Otherwise asset margins to be revisited

Group NIM 2.03%

R&C NIM2

Q210 Outlook

GBM 1.01%

Non-Core 1.22%

3.11%

UK Retail Assets UK Corporate Assets

00.5

11.5

22.5

UK Retail UK Corporate US R&C GTS Wealth

1.70%1

Low

2.70%1

Current position

Recent peaks

Current position & outlook Asset repricing continues to progress, but well advanced

n/a

n/a

Still to reprice

Repriced

If deposit yields remain at 2010 levels in 2011 the impact versus plan4 would be c£400m lower

incremental income2 Retail & Commercial comprises UK Retail, UK Corporate, Wealth, Global Transaction Services, Ulster Bank and US Retail and Commercial divisions1 Q2 2009 (Group NIM low), Q1 2009 (R&C NIM Low)4 Assumes deposit growth in-line with plan & no change in competitive pricing environment

Still to reprice

Repriced

3 Indicative, based on internal funds transfer pricing

3

21

The Group can grow organically

Revenue growth - business initiatives

Leverage group capabilities e.g.GTS & GBM - creation of Global Network Banking to extend product delivery to GBM clients worldwideUK Retail - restructure of bancassurance JV with Aviva, full ownership and control of in-house investment productsUlster Bank - Maximising scalable synergies between Retail and Corporate distribution channels and leveraging key Group products, platforms & expertiseUK Corporate & GTS - supporting UK clients with International transaction service capabilities

Building client relationships e.g.UK Retail & Ulster – launch of Customer Charters and enhanced service propositionUS Retail & Commercial - focus on client relationships and penetration of Consumer Finance productsGBM – deepening Corporate and FI relationships with Core clients and in liquid Emerging Markets

Customer Relationships

Cross-sell

Expanding product suite and channel availability e.g.UK Retail - launch of new Mastercard world proposition and investment in direct channelsUK Corporate - focus on delivering customer centric ‘whole bank’ propositionGBM - building out structuring/solutions capability with focus on Emerging Markets, Credit and HybridsUS Retail & Commercial - building mass affluent proposition

Product & Channel Innovation

22

Business Services’ Sunrise ProgrammeRealignment of the Target Operating Model to produce more efficient spans of management, control and processingEmbed Lean practices and redesign processes to create a more cost–efficient operationImproved use of suppliers to enable a more cost-effective, diverse and flexible delivery platformReduction in the size and cost of the Group’s global property portfolio, more closely aligned to business needs

The Group can deliver good cost efficiency

Investment in the business

Cost reduction programme

Global Banking & Markets’ North Star ProgrammeA 2-year, ‘front-to-back’ infrastructure investment programmeImproved controls, automated and de-duplicated processesConsolidation and optimisation of data centres and support functionsInvestment Cost Run-rate Saving

Cost Reduction Programme £3.5bn

Investment Programme £2.6bn

Example InitiativesCost reduction programme annualised savings on track to exceed market commitment of £2.5bn

2009 2010E 2011E 2012E 2013E

0.5

1.41.1

0.4 0.1

1.7

2.32.7

3.1 3.3

Gross 5-year Investment Spend £6.1bn

Projected programme investment and returns, £bn

23

The Group is investing significantly in the business

Investment in the business

We are investing for future efficiencies and revenue growth

Wealth

GBM

Total benefits2010 - 2013E

Investment

Retail Transformation ProgrammeInitiatives to drive through efficiencies, such as lean in branches and head office reorganisation, are in deliveryImprovements in product-set in progress, focused initially on credit cards, MTAs and savings.Transformation of data underway, driving decisions based on customer value

UK Retail

Time to introduce a new notice account

12Weeks

2Weeks

Pre-investment Post-investment

Platform Integration (Avaloq)Provision of an integrated Wealth IT platform, to launch in Adam & Co 2010 and Coutts 2011Enabling comprehensive view and analytics of customer accounts, enhanced reporting and quicker response times to customer servicing.

North Star ProgrammeInvestment in high-priority business development capabilitiesInvestment in balance sheet and liquidity managementIncreased and enhanced electronic trading facilities and customer service tools. Automation and standardisation of processes, improving both the client experience and control environment

2.7x Investment

Cost Reduction Programme £3.5bn

Investment Programme £2.6bnGross 5-year Investment Spend £6.1bn

16x more Automated Processes

Pre-investment Post-investment

Programme return on investment

Automation of key manual processes

24

The Group is investing significantly in the business

Investment in the business

We are investing for future efficiencies and revenue growth

Global Transaction Services

Group Functions

Corporate &Commercial

Finance Transformation ProgrammeRedesign of the Finance function to enable a more efficient Target Operating Model and delivery approachImproved internal, external reporting, and budgeting and forecasting processes.Improved and integrated technology to support data capture and provision

Project Genesis, Credit Transformation and improving MIReengineer customer relationship-managed proposition, enhancing delivery channels and improved MI and analytics and servicing capabilitiesImproving credit decisioning by investing in systems and platforms

2011E 2013E

Reduction in cost base

Investment across products and geographic regionsInvesting in new products to strengthen product capabilities and penetrationImproving and expanding self-service tools e.g. web-based portals, enhancing accessibility and enabling customers to better manage investmentsInvesting in improved processes and MI

Cost Reduction Programme £3.5bn

Investment Programme £2.6bn

Yr 1E Yr 5E

+ c8,200clients

On-line use - Businesses withturnover <£250k

Yr 1E Yr 3E

+c50%

GTS Americas - New cash management clients

(20%)

Gross 5-year Investment Spend £6.1bn

25

The Core Business targets attractive operating leverage

Operating leverage

Broadly Flat Costs

Improved Revenue C:I Current 56.8%

Drives Operating

Profit

We have the levers to pull to drive future operating efficiency

C:I Target<50%

Further margin recovery

Non-Interest Income growth

Cost control & business efficiency

Successful execution of the Strategic Plan will deliver targeted recovery in operating profitability

Current 2013E 2013E 2013ECurrent CurrentNote: Illustrative example only

1

1 Core Q210 adjusted cost:income ratio ex FVooD

26

‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘13

0.9%

2.3%

Outer years of the plan should see impairments normalise

Impairments

2003-07 avg: 0.5%

1998-2008 avg: 0.6%

H110

1.8%

Impairment as a % of net loans and advances

3.092.07Core

5.16

Impairments (£bn)

Non-Core

% of loans1

Total

Trend back towards historic levels but influenced by economic recovery

Historic levels flattered by high loan growth in 2003-07 period

Large Non-Core impairment reduction as portfolio runs off – small impairment charges expected in 2013-14

4.64%0.96%

1.82%

Impairments - Returning to normalised levels

H110 Key Metrics

1 Annualised

27

US R&CFunding surplus, £bnLoan:deposit ratio

+11.9 +11.580% 81% <90%

GTSFunding surplus, £bnLoan:deposit ratio

+47.6 +45.521% 25% <20%

WealthFunding surplus, £bnLoan:deposit ratio

+22.0 +21.338% 41% <30%

Ulster BankFunding gap, £bnLoan:deposit ratio

(16.9) (12.2)177% 154% <150%

335368

Q209 Q210

Group loans to be deposit funded

Continued development in funding profile

…and we are making progress in our funding mixDeposit initiatives are gaining traction…

Deposit Growth Potential

UK Retail

UK Corporate

GTS

Example deposit initiatives

Up 10% y-o-y

Core Retail & Commercial deposit growth, £bn

Invest in new affluent proposition with enhanced wealth management products

We have strong networks and franchises able to grow the deposit base organically across the Group

Cross-sell with GTS product set into core customer base

Leverage network to cross-sell to global RBS clients

Wealth Increased product flexibility with system investment

Divisional funding gap progression

UK RetailFunding gap1, £bnLoan:deposit ratio2

2009 Q210Target

Ratio 2013(13.1) (12.8)115% 114% <105%

UK CorporateFunding gap, £bnLoan:deposit ratio

(22.5) (18.3)126% 119% <130%

1 Net loans and advances to customers less customer deposits (excluding repos) 2 Net of provisions

28

Continued de-risking of the balance sheetNon-Core run-down and EU disposals progressing well, lowers execution risk

£20bn reduction achieved in Q210

TPAs decreased by £84bn at Q210, reduction on plan

2008 2009 Q210 2010 2011 2012 2013

258201

143 11882 20-40

85

36

29

1923

1 Agreed sale for a premium of £350m to net assets at time of closing. Implied equity is £1.3bn applying an 8.5% Core Tier 1 ratio to RWAs of £15.2bn as at 31 December 2009.2 Sale of Metals, Oil and European Energy business lines agreed on 16th February 2010 and completed 1st July 2010. 3 Announced the sale of the Energy Solutions Business line to Noble Americas Gas and Power on 20th September, completion expected Q4 2010.

174

29

Targeted

13

£bnUndrawn commitmentsFunded assets

Q210FXRun-Off Asset sales

ImpairmentsQ110

174

194(8)

(6)

(5)(1)

Non-Core asset portfolio run-off/sales on target

Ongoing risk reduction

3 of the 4 EU mandatory disposals announced:

UK SME/Branches: sale process to Santander announced (c£1.65bn), completion by end 20111

Global Merchant Services: sale process to Advent International & Bain Capital announced, completion by end 2010

RBS Sempra: completed partial sale to JP Morgan2, and announced further divestment to Nobel3, balance of business disposal in progress

RBS Insurance disposal: H2 2012 current target for IPO/trade sale

Work progressing on acceleration of run-off process, pipeline remains good

Non-Core Asset Disposals

29

Capital planningThe Group will maintain a conservative but rational capital structure

The Group’s capital position is healthy versus peers1

At the end of plan options appearHowever regulatory uncertainties remain

Increased capital requirements

Basel III timing and capital calibration

Countercyclical capital proposals

Resolution regimes

UK Banking Commission

The Group’s leverage is in-line with peers

Look to exit APS c2012

Ordinary dividend restriction lifted 2012

Optimise capital structure in best interests of creditors and shareholders longer term

9.2 10.0 9.99.0 9.0

1.3

4

8

12

RBS Peer 1 Peer 2 Peer 3 Peer 4

Comparative Core Tier 1 Capital Ratios, %

Need to retain strong credit standing with counterparties and in markets (AA- category)

5.8 5.54.0

6.4

0

5

RBS Q210 UK Peers European Peers US Peers

Tier 1 Leverage Ratios2 vs Peer averages1,3,4, %

1 UK Peers consist of Barclays, HSBC, LBG and Standard Chartered. 2 Tier 1 leverage ratio is Tier 1 Capital divided by funded tangible assets. 3 European Peers consist of Credit Suisse, Deutsche Bank, Santander and UBS. 4 US Peers consist of Bank of America, Citigroup, JP Morgan and Wells Fargo.

Ex. APS

APS benefit

10.5

Concluding commentsCompeting in the age of austerity

31

2013 Core EPS prospectsCross check to book multiple after impact of Non-Core rundown lossesConsideration of Contingent Capital and “B”Share exit mechanics and timing

As plan targets are hit, and

External uncertainties reduce

RBS Investment Case clarifies

Investment CaseBusiness Case

Market leading businesses in large, enduring, customer driven markets

Retail & Commercial businesses to drive earnings recovery from here. GBM remains a key contributor however.

Well capitalised Group and tail risks insured, achieves risk profile “AA” category

Turnaround story key, advanced, but execution risk remains

2010 a year of implementation

Visibility of turnaround strengthening into 2011

Building Blocks

RBS Investment CaseImproved valuation will come with delivery of the plan

32

Key messages

Leading positions in all our customer businesses

Strong, predictable and resilient business performance

Top tier market franchises

Complementary portfolio with clear cohesion logic and synergies

Balanced by geography, growth, risk profile and business cycleBalanced portfolio

Commitment to RoE >15% on an expanded equity base

Attractive and sustainable income characteristics

Solid profitability and attractive return potential

Clean balance sheet with a CT1 target >8%

Criteria for standalone AA category rating met

Low volatility underpinned by strong balance sheet

Proven management track record, universal disciplines in place

Roadmap to orderly UK Government stake sell down

Standalone strength and solid foundations

Transparent and responsive communication with few negative surprises

Clearly articulated strategy with evidence of it workingInvestor friendly

Delivering the plan should create an attractive investment case

The New RBS in 2013

Questions?